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Johnson's Russia List


September 23, 1998    
This Date's Issues: 23922393

Johnson's Russia List
23 September 1998

[Note from David Johnson:
1. Patrick Armstrong: PRINTING MONEY.
3. Reuters: Russia to open nuclear cities with U.S. aid.
4. Moscow Times: Yavlinsky Recovering.
5. Moscow Times: Natalya Shulyakovskaya, Regional Leaders Get Cabinet

7. Philadelphia Inquirer: Michael Zielenziger, Sudden reality of a hungry 
winter. On Russia's Asian frontier, the economic collapse has reached everyday 
lives 4,200 miles from the Kremlin. 

8. RFE/RL: Floriana Fossato, Moscow Mayor Moves To Broaden National Power

9. NTV: 'Big Money' Predicts Less Political Stability.
10. The Guardian (UK): James Meek, Killer TB threat to world.
11. Interfax: Gustov Says Supports Mergers Between Russian Regions.
12. Reuters: Microsoft says Russian information sector stagnating.
13. Bloomberg: Russia's Maslyukov Says Government Won't Take Over Industry.
14. Interfax: Chubays Hails 'Immense Potential' of Kiriyenko, Nemtsov.]


Date: Tue, 22 Sep 1998
From: Patrick Armstrong <>

Not being in any way an economist, I make the
following observations with considerable
trepidation. But, on the other hand, because the
world market value of economists has declined
somewhat recently, I am emboldened to put them out
I was very struck by an observation that the
M2/GDP ratio in Russia was much lower than that in
many other countries(Frank Durgin JRL 2350/3 and
JRL 2390/3). This was followed by the information
from the University of Western Ontario/Abalkin
study (JRL 2364/2) that there are (depending on
the exchange rate of the moment and ignoring the
huge sums outside the country) more US dollars
inside Russia than rubles (at 10RUR=1USD, the
ratio is about 50-50; at 20RUR=1USD the ratio is
about 33-66). If these estimates are in the
ballpark, there are two conclusions:
1) Russians alone have enough US dollars to buy
the value of the ruble. 
2) The amount of rubles in the Russian economy is
indeed very low.
Conventional opinion says that printing rubles
would lead to inflation on the argument that more
money, in the absence of more goods and services,
just makes the same stuff more expensive. True
enough, but is it a fact that, in Russia, we have
an absence of goods and services? Perhaps what we really
have are the goods and services without the 
money that should have been paid for them. 
The federal government owes
billions for goods and services that have actually
been rendered -- the soldiers, doctors, teachers
and coal miners have all gone on working but they
haven't been paid. (Kagarliskiy's testimony to the
US Congress says that the total of unpaid wages is
about 75 billion RUR (JRL 2384/2) -- about one
fifth of what Abalkin says M2 is!). The goods and
services that they have produced do exist but the
money with which they were supposed to be paid
does not. Likewise, when people had their savings
wiped out in 1992 (and again recently), their
money was also the result of earnings for goods
and services produced. If the government were to
print the money to pay off the wages and other
funds that it owes, and compensated people for the
destruction of their savings in 1992, would
inflation be the result?
It appears a foregone conclusion that the
government is going to print more money: it, and
economists like Abalkin (JRL 2381/9) argue that
this emission will not be inflationary and seem to
be following logic something like that above. I
would welcome comments from someone -- like Barry
Ickes (JRL 2383/3) or Ray Thomas (2385/1) or Frank Durgin -- who
can clearly and concisely say whether this makes
sense or not.


Date: Tue, 22 Sep 1998 
From: yale richmond <>
Subject: Understanding the Russians


President Clinton and U.S. experts on Russia are correctly criticized by
Vladimir Shlapentokh (JRL 2390) for paying too much attention to the
popularity ratings of Russian political leaders and ignoring the views of
the Russian people on the reforms of the post-Soviet years. Using his
training as a sociologist and Russia expert, the Michigan State University
professor cites recent public opinion polls which show Russian negative
attitudes on such issues as privatization, accumulation of wealth, a
market economy, and corruption, while reaffirming traditional Russian
support for egalitarianism, a paternalistic state, and suspicion of the West. 
So what else is new? Those who took the time to read my book, From Nyet to
Da: Understanding the Russians (first published in 1992 by Intercultural
Press and reissued in 1996 in an updated edition), will find it all there,
based not on recent public opinion polls but rather on my studies of
Russian geography, history, culture, religion, as well as many years of
personal, day-to-day encounters with Russians as a U.S. diplomat. 
The book was written in 1990-92 when Moscow was filling up with Americans
who had come to advise Russians in their transition to democracy and a free
market but who knew little or nothing about Russian history and culture,
and why they behave like Russians. I broke no new ground but was able to
summarize and explain, in a mere 191 pages, the traditional Russian
attitudes that were likely to determine the future of the new Russia. 
Sad to say, it's all come true, and it was there for the reading in 1992.


Russia to open nuclear cities with U.S. aid
By Mark Thompson

VIENNA, Sept 22 (Reuters) - Russia said on Tuesday it would open 10 secret
cities at the core of its nuclear weapons complex to foreign investment in a
U.S.-backed effort aimed at redeploying highly skilled workers in the civil
Russian Minister of Atomic Energy Yevgeny Adamov and U.S. Energy Secretary
Bill Richardson signed an accord which includes $30 million of U.S. state
funding in 1999 to bring jobs and businesses to the cities' 600,000
"With the end of the Cold War we are helping to open these cities, open them
to cooperation on issues of safety and security, open to the transition to a
peacetime economy and open to new training," Richardson told Reuters in an
Richardson said the deal, which covers some of the most secret facilities in
the former Soviet Union, was important for national security and private
sector investment in Russia. 
"I cannot emphasize enough how important it is to us all that economic
hardship not drive Russian nuclear weapons scientists into employment in
places like Iran and North Korea," he said. 
"Helping commercialise the Russian nuclear weapons complex in the interests of
global security and non-proliferation will help ensure strategic stability in
the U.S.-Russian nuclear relationship as both reduce their nuclear arsenals." 
Adamov said a smaller nuclear strike force meant it was inevitable jobs would
be lost at the weapons installations, mostly situated in the Urals and
But for social and non-proliferation reasons, it was vitally important to
offer the redundant scientists and engineers a new occupation, he said. 
"We are ready to open up these cities but the people living in them are
opposed to this because they compare the standard of living inside and out and
prefer to stay where they are," he told reporters. 
Not only has Russia's economic turmoil made lucrative offers from other states
keen to employ their nuclear weapons engineers even more attractive, it has
also driven away foreign investment. 
Nevertheless, U.S. officials are confident the project will succeed. They are
assuming Russian and western corporate investors will treble the amount of
money the U.S. government is putting up front. 
"We've had investors lining up for these projects. There is still a lot of
interest in the high technology sector in Russia," an energy department
official said. 
Twenty-two pilot projects, including the development of a linear electronic
accelerator for food sterilisation and techniques for dismantling and
decontaminating mothballed nuclear reactors, were already underway. 
Richardson and Adamov also agreed a number of measures to remove obstacles
hindering the implementation of a $13 billion 20-year deal covering U.S.
purchases of Russian weapons grade uranium for use in commercial nuclear
"The framework in today's joint report will ensure that smooth implementation
of the agreement will continue for the next months while all parties seek
agreement on commercial terms for fair payment to Russia," Richardson said. 


Moscow Times
September 23, 1998 
IN BRIEF: Yavlinsky Recovering 

MOSCOW -- Grigory Yavlinsky, leader of the liberal Yabloko faction in
parliament's lower house, is recovering from a heart attack suffered last week
but doctors have not set a date for his release from the hospital, his
spokeswoman said Tuesday. 
Yavlinsky, 46, spends his time receiving visitors, talking on his mobile
telephone and reading an overview of the Russian press, spokeswoman Yevgenia
Dillendorf said. 
He is to be moved Wednesday from his private hospital room into a general ward
with other patients, she said. 
Yavlinsky was rushed to a Moscow hospital Friday evening after participating
in a radio call-in program. His heart attack was brought on by a particularly
nasty bout of the flu, Dillendorf said, citing the politician's doctors. 


Moscow Times
September 23, 1998 
Regional Leaders Get Cabinet Voice 
By Natalya Shulyakovskaya
Staff Writer

President Boris Yeltsin approved a revamped structure Tuesday for the new
government of Prime Minister Yevgeny Primakov, overhauling several ministries
and giving influential regional leaders seats in the Cabinet's inner circle. 
Primakov also asked Yeltsin to approve the appointment of Valentina Matviyenko
as deputy prime minister in charge of social affairs, a post turned down by at
least three others. Matviyenko, a little-known diplomat who currently is the
ambassador to Greece, would become the highest-ranking female official in
post-Soviet times. 
Yet despite the financial turmoil, no one has been named to key economic
posts, such as those of finance minister and head of the State Tax Service. 
Yeltsin approved a Cabinet structure of two first deputy prime ministers and
four deputy prime ministers. The president also signed off on the creation of
five new ministries and agreed to include leaders of eight associations of
regional governors in the presidium of the Cabinet, the prime minister's inner
circle that until now had only included deputy prime ministers and key
ministers of the government. 
By including more regional leaders in the government -- starting with the
earlier appointment of Vadim Gustov, the governor of Leningrad region, as a
first deputy prime minister -- Primakov is creating a government drawn from
the broad array of political forces that supported his confirmation as prime
Primakov was approved Sept. 11 after two attempts to bring Viktor Chernomyrdin
back into power failed miserably. 
The new prime minister also is trying to make sure that the responsibility for
any failure is spread among all the political forces, analysts said. 
"Primakov is trying to align the regional bosses, the regional barons, with
his government -- remembering that they contributed a lot to dislodging
Kiriyenko's government," said Yury Korgunyuk, a political analyst with the
INDEM political research institute. 
"But this friendship could cost a lot," Korgunyuk said. "I'm afraid that this
government will not be able to make any of the tough decisions necessary to
take the country out of the crisis." 
As if to prove the point, Aman Tuleyev, the governor of the troubled Kemerovo
region, where unpaid coal miners have held strikes to demand unpaid back
wages, said at a news conference Tuesday that the government should find money
to repay at least some of the debts to the regions. Otherwise, he said, the
governors would be on the streets shouting anti-Yeltsin slogans along with the
Primakov is expected to announce the main points of his government's anti-
crisis policy at a meeting with regional governors Sept. 29, Interfax reported
Tuesday, citing Gustov. Among other things, the prime minister will discuss a
system for urgently paying off overdue pensions, Gustov said. 
In the same decree Tuesday, Yeltsin also said he was bringing the new Central
Bank chairman, Viktor Gerashchenko, and the chairman of the Russian Academy of
Sciences, Yury Osipov, into the Cabinet's inner circle. 
The inclusion of Gerashchenko is likely to limit the independence of the
Central Bank. 
"Turning a Central Bank into a mere part of the government is understandable
in a situation of constant emission," said Nikolai Petrov, an analyst at
Moscow Carnegie Center. 
The cryptic move of bringing in Osipov was seen largely as a tribute to
Primakov's academic past and a throwback to Soviet days when science was
represented in Communist Party governing bodies. 
With the appointment of Matviyenko, Primakov was finally able to find someone
to accept the job of his deputy in charge of social issues. 
It had already been turned down by three influential members of the State
Duma: Grigory Yavlinsky, the leader of the liberal Yabloko faction; Alexande r
Shokhin, the leader of the Our Home Is Russia Duma faction who later accepted
the post of first deputy prime minister; and Vladimir Ryzhkov, deputy speaker
of the Duma. 
Matviyenko, 49, was a deputy of the Soviet parliament from 1989 to 1991,
heading its committee on women's, family and children's issues, and a member
of the parliament's presidium, where she worked with Primakov. 
Matviyenko agreed to accept the job out of friendship with Primakov, Russian
media reported. In the 1970s and '80s, she was an active member of the
Communist Party youth league. 
The job promises to be one of the toughest in the new government, which is
faced with finding millions of rubles to pay overdue wages and pensions. 
Yeltsin approved the creation of five new ministries and several new
committees and agencies, dividing among them the responsibilities of newly
abolished ministries and committees. 
The Ministry of Anti-Monopoly Policy and Support of Entrepreneurship will take
on responsibilities for policies handled earlier by several committees,
including the State Anti-Monopoly Committee. 
The former Nationalities Ministry, which handled regional policy, was split
into two bodies, the Nationalities Ministry and the Regional Affairs Ministry.
The State Committee for Northern Territories was also folded into the latter
The decree restored the CIS Ministry and formed a Trade Ministry to take over
the foreign trade functions of the liquidated Trade and Industry Ministry. 
Yeltsin also liquidated the Land Policy and Construction Ministry and handed
the issues of land policy to the new State Land Committee. 


Date: Tue, 22 Sep 1998 
From: (John Helmer) 

The Athens News, September 23, 1998
>From John Helmer in Moscow

The promotion of Valentina Matviyenko, Russia's Ambassador to Greece,
to the post of Deputy Prime Minister for social affairs, is interpreted
in Moscow as a tactical political move by Prime Minister Yevgeny Primakov
to limit his vulnerability to criticism of the government's
Before she was sent to Athens, Matviyenko was director of a section of
the Foreign Ministry grandiosely titled "Department for Relations with 
Federation Members, the Federal Parliament, and Social and Political
Organisations." In short, she was Primakov's lobbyist. His relative success
in sustaining support from a broad spectrum of deputies was, in large
measure, Matviyenko's achievement also.
Before taking that post, she ran a lower-level political relations function in
the administration of the St. Petersburg mayor. 
Among the first observations to be made about Matviyenko, since the unexpected
appointment was announced on Tuesday, the best is that she is an "iron lady",
with strong personal will and solid political ties to Primakov. The worst
is that she has been selected for a job noone else wants -- "a woman to
be endlessly pregnant, but never deliver."
It has already been confirmed that Prime Minister Primakov first offered
the post, which oversees the government's labour, health and welfare
portfolios, to the social democatic opposition leader in the Duma, Grigory 
Yavlinsky. He refused, and went on the attack against Primakov for
failure to enunciate a clear set of policy priorities. The strain of
the Russian crisis sent Yavlinsky to hospital with suspected heart
failure on the weekend.
After Yavlinsky's refusal, Primakov turned to Vladimir Ryzhkov, the 33-year 
old leader of the pro-government faction in the Duma, Our Home is Russia.
Ryzhkov accepted privately, but then called a press conference
to say that he was withdrawing. He claimed he was unable to deal with
the magnitude of Russia's social problems.
By picking a woman, Primakov has also tried to reduce his weakness in
the latest polls. These show that, while he commands 65% approval from
Russian men, his backing from Russian women is much weaker, at 52%.
In the past, President Boris Yeltsin has selected women to take charge of 
the social portfolio when he thought they could blunt public resentment at
the government's refusal to pay wages and pensions. Ella Pamfilova was 
selected from the ranks of the pro-government party, as was Irina
Hakamada. Oksana Dimitrieva, from Yavlinsky's faction, was given the labour 
ministry earlier this year. None of them has had any impact on the
worsening social conditions in the country.
Matviyenko's immediate predecessors were Oleg Syusyev, who was promoted
by Yeltsin because of his connexions with the country's regional and
city governments; he was mayor of Samara at the time. Syusyev replaced
Victor Ilyushin, once one of Yeltsin's closest aides, who was dumped
during Yeltsin's lengthy illness in 1996. For him, the rank of deputy
prime minister was an empty reward, and he abandoned it quickly to run the
public relations division of Gazprom. 
Opposition politicians point out that so long as the finances of the
government are directed at bailing out Russia's powerful banks and commercial
interests, there can be little for Matviyenko to do. Primakov has
promised to repay wages, pensions, and depositors' savings, but public 
reaction is deeply skeptical of his ability to deliver. Matviyenko faces
the same doubt. A current opinion poll found that less than 6% of Russians
believe the country is going in the "right direction."


Philadelphia Inquirer
21 September 1998
[for personal use only]
Sudden reality of a hungry winter 
On Russia's Asian frontier, the economic collapse has reached everyday lives
4,200 miles from the Kremlin. 
By Michael Zielenziger

VLADIVOSTOK, Russia -- A microcosm of Russia's economic despair unfolded on
Semenovskaya Street in the cold, blue haze of the Pacific dawn. Its innocent
cast -- pensioners, fishermen, laborers with rough hands -- shuffled wearily
into line in front of the heavy iron doors of the Incom Bank, knowing full
well how their saga would end.
When the bank's gunmetal-gray doors finally opened, late, just after 9:40
a.m., it took only a few moments before a sad-faced teller at a clumsy
computer terminal told Alexei Ignatiem and his friends that the bank could not
give them a dime of their money.
"Every day it is the same," said Ignatiem, a bulky, silver-haired fisherman
sporting a black sweatshirt commemorating Washington State University's trip
to the Rose Bowl in January, a souvenir from a six-month sojourn in America.
"I am owed $1,500 in U.S. dollars on my Visa card from my fishing partner in
Seattle. The Americans paid the bill, but now the bank cannot pay me."
He used to be able to go to the bank's ATM and withdraw his money, but now the
machine is closed.
"If this keeps up," he said, shaking his head in frustration, "I'll have no
spare food to feed my family."
Here on Russia's Asian frontier, a long fingertip of land that borders China
and North Korea about 4,200 miles from the Kremlin, the effects of this
nation's sudden economic collapse have reached the everyday lives of fishermen
such as Ignatiem.
In 1948, Soviet dictator Joseph Stalin closed this city to outsiders,
shuttered the American consulate, erased references to the city from most
maps, and used the citadel as a fortress to protect his empire from potential
Asian enemies.
Even today, Vladivostok's international airport remains nearly 35 miles from
the city to prevent unauthorized visitors from stealing a glimpse of the
city's strategic "Golden Horn" harbor, a calm bay surrounded by steep peaks.
In the days before Mikhail Gorbachev's perestroika, foreigners riding the
Trans-Siberian Railway had to get off before reaching the terminus, a grand
European-style train station, now refurbished and painted a classic ochre.
Under communism, there was an implicit bargain between the Far East and the
rest of the country. In exchange for carrying out such military tasks as
supporting troops along the Chinese border and providing a home for the Soviet
Pacific Fleet and its ballistic missile submarines, the eight million people
of the Maritimes got their food and basic necessities from the central
As a legacy of that era, Russia's Primorye krai, or maritime region, still
imports an estimated 80 percent of its food from abroad, much of it from the
United States. But the wild gyrations of the ruble in the last month have
immobilized consumer markets, halted container shipments carrying frozen foods
and consumer goods, and created huge losses for traders and financial firms
that did not anticipate the currency collapse.
"We are on the edge of economic paralysis," said Andrew Fox, chairman of Tiger
Securities, a local investment firm. "There is no money coming in from
overseas, so it's hard to send money abroad. Importers can't pay for their
shipments and couldn't sell the goods even if they could. So boats aren't
coming here to dock."
And he warned: "Winter is coming. Are we running out of food? Yes."
Businessmen have stopped buying foreign food because they do not know how much
to sell it for in rubles -- or whether customers will be able to afford it at
new and higher prices. To compound the problem, Moscow is seven hours behind
Vladivostok, so the day's "official" exchange rate is set in the capital just
as businesspeople here are heading home for the evening.
Local farmers taking their corn and tomatoes to market do not know how much to
charge for their produce, because like everyone else they want to convert
their pay into dollars.
The giant cranes along the city's magnificent harbor have fallen silent, as
ships have stopped bringing imported goods. And at times, panic-hoarding of
flour, vegetables and other commodities has stripped stores clean.
"My company's closed. There's no trading, and I have no stock," said Igor
Dorokhov, who imports meat and produce from Australia. "I can't collect what
I'm owed, and I can't figure any prices."
Ignatiem the fisherman, too, was blindsided by the financial crisis in Moscow.
His bank cannot give him the money he is owed because, like a supermarket
stripped of its merchandise, Incom Bank finds itself without cash.
Before Moscow defaulted on its foreign loans, the bank could earn as much as
80 percent interest by investing its cash in bonds guaranteed by the Russian
government. But when the government refused to pay the money it owed, the
bonds became worthless, and Ignatiem's money essentially disappeared. The best
the bank can do is offer to pay him his $1,500 in November -- but only in
rubles, and at the Sept. 1 exchange rate.
"I don't want my dollars in rubles. I want my dollars," the fisherman said. "I
don't understand how this happened; I just want someone to fix it."
The default climaxed a months-long downward economic spiral. Government
agencies refused to pay for basic services, such as electricity and water, and
basic industries refused to pay their taxes. Without any revenue, the Russian
government stopped paying thousands of miners, teachers, doctors and military
With the breakdown in tax collections and cash payments for services, more
than a third of the economy operates on the barter system. One concrete
factory exchanges bags of cement for fish, then pays its taxes in fish.
"The financial crisis reflects the crisis of all Russia," said Margarita
Kraeva, who heads the department of economics and management at Vladivostok
State University of Economics and Service. "But now the fiscal crisis has made
the economic crisis even worse."
The financial crisis has accelerated a swift decline in services in this city
of nearly one million. Ambulance drivers have been on strike for weeks.
Doctors at the mental hospital protest their lack of salaries nearly every day
in front of the governor's office. Last week, workers at the power plant took
their supervisors hostage for three days to win a portion of their back wages.
At midmorning, dozens of electric trams stop on their tracks because the
electric power is cut. Teachers in rural areas are on strike because they
haven't been paid since March. 
While most of the city's residents are disgusted with the corrupt politicians
of Moscow, few think the Russian Far East would be better off on its own,
without the rest of Russia.
"My father's family is from Ukraine and Belorussia; my mother's family is from
the Urals and Kaliningrad," said Dorokhov, the importer. "I am a Russian. It
is impossible for us to live separately from Moscow. We are one country, and
we want to be Russian."
"There is an unbelievable sense of acceptance," said one Western diplomat
here. "These are people who know how to survive almost any hardship, who will
somehow always get through."
Here at the eastern edge of Russia, a traditional fear of longtime rival China
also helps cement the ties to Moscow. Even when the two countries were
supposedly united by communist ideology, armed skirmishes along their long
border almost escalated into war.
"The Russians here are unbelievably paranoid about China," the Western
diplomat said. "They are terribly worried about being swallowed up by the
'yellow hordes,' as they would put it, just a few hundred miles away."
Optimists hope the nation's currency crisis can be solved within a few weeks.
A stable ruble, at least, would give the Russian Far East time to accumulate
the food it needs to survive the long winter.
But pessimists are talking of "a hungry winter" unless the nation's finances
stabilize soon. As television producer Sergei Chemtov joked: "Don't forget our
nuclear weapons, or our hungry winter may end up being your problem."
"Right now, I am sad," said Ignatiem as he headed home empty-handed after
another futile wait at his failing bank. "But in the future, I will be angry."


Russia: Moscow Mayor Moves To Broaden National Power Base 
By Floriana Fossato

Moscow, 22 September 1998 (RFE/RL) -- Not many Russian governors receive on
their birthday congratulations and gifts from the Kremlin. The powerful Mayor
of Moscow, Yuri Luzhkov, does. And in these times of political and financial
uncertainty, that is not by chance.
President Boris Yeltsin yesterday (Sept. 21) wished Luzhkov a happy 62nd
birthday and Russian television channels showed him handling a large present
wrapped in green paper. Hours later, Prime Minister Yevgeny Primakov found
time to travel to Moscow City Hall and personally give Luzhkov the present. 
This comes at a moment when Primakov is busy putting the final touches on the
lineup of his new government, which is supposed to take the country out of its
worst crisis of the decade. 
More than ever, Luzhkov wields huge financial and political clout not only in
the Russian capital, but also nationwide. Analysts in Moscow say that the
Kremlin's show of consideration is among other things a sign of fear, as it
comes at the moment when populist, nationalist-leaning Luzhkov is openly
sealing his ties with Yeltsin's communist foes.
Yeltsin's assertion that the Moscow mayor deserves a tribute seems to disguise
a last-minute attempt to make a "non aggression pact" with Luzhkov, said one
analyst who wished to remain anonymous.
Luzhkov has repeatedly denied having presidential ambitions, but many
political forces in Moscow and across Russia see him as a likely presidential
candidate in 2000, when the next presidential vote is scheduled. He could also
be a candidate in any early election. 
The Russian constitution foresees a long and complicated procedure for the
president's impeachment, but the communist-dominated State Duma is stepping up
its efforts in this direction. Nationwide protests at the beginning of October
are set to take place under the banner "Yeltsin step down." Meanwhile, Luzhkov
and communist leader Gennady Zyuganov in the last few days have made known
that their positions are growing closer.
In a move very similar to previous communist demands, Luzhkov has urged
Primakov to re-nationalize same former state companies, adding that the
architects of privatization schemes, as well as officials involved in
investment pyramid schemes, should be put on trial.
On Sept. 19 Zyuganov openly praised Luzhkov at the end of a communist party
leadership meeting. He said he was pleased to see that "in the present crisis
situation, Luzhkov has assumed positions aimed at strengthening order in the
country." Using a Soviet-era term -- for those who are not party members, but
are close to party positions -- Zyuganov added that people like Luzhkov are
considered by the communists as "poputchiki", or fellow-travelers.
The daily "Kommersant" reports that yesterday Luzhkov agreed that his goals
do, indeed coincide with those of the communists. The daily quoted him as
saying that "this is not a casually coinciding situation." 
Luzhkov has the reputation of a manager who gets things done. In important
matters, such as dealing with his own political future, the Moscow mayor does
not usually limit action to a mere declaration of intentions. One of his
closest allies, general Andrei Nikolaev, is reportedly already working to
widen the political platform that could bring Luzhkov to power.
Yeltsin fired Nikolaev from his post of Border Guards Service chief earlier
this year. The ambitious general, reportedly with Luzhkov's backing, soon
obtained a deputy's seat in the State Duma and created a political movement,
the "Union of People's Power and Labor," that in a matter of only few months
has already forged alliances with 12 centrist and left political
Nikolaev's movement recently signed a protocol aimed at coordinating
activities with the communist-led "Popular and Patriotic Union." 
Yesterday Nikolaev said that other parties, including the communist-leaning
Agrarians, will soon officially join the alliance. He also announced that his
plans for the next parliamentary elections --scheduled for 1999-- include the
creation of a wide bloc, that would become, in his words, The "party of the
Nikolaev said that, if such a bloc will emerge, it is very likely that its
common candidate for the presidential vote be Luzhkov. According to Nikolaev,
Luzhkov "fits both centrist and leftist schemes, as he represents the
interests of the majority of the population."
However, "Kommersant," quoting unnamed communist Duma deputies, said
Nikolaev's predictions do not take into account that most communist
legislators would like to see their leader, Zyuganov, as the common candidate
for the next presidential election. Analysts say that much depends on when the
vote would take place. If the election date remains unchanged, they say, it is
likely that Luzhkov will have enough time to bring most communist deputies to
his side. In case of early elections, a power-fight among the "fellow-
travelers" could easily break out.
Until the present financial crisis started biting hard in the capital,
sweeping away savings and leaving the emerging middle-class jobless, Moscow
had stood as the symbol of coming abundance. Moscow salaries were 65 percent
above the national average, everything was outrageously expensive, but people
were saying that "what is important is that everything was available." 
With some 80 percent of foreign investment concentrated in the capital and
most banking and financial resources located there, Luzhkov had no trouble
collecting precious tax and other revenues for the city budget. And he was
lavishly spending on controversial construction projects like the Cathedral of
Christ The Savior or the monument to Peter the Great.
Muscovites, who in 1996 re-elected him with 90 percent of the vote, are now
anxious that the capital could end up looking like more deprived places
abounding across Russia. They would most likely support the Moscow mayor in a
possible presidential run, thinking that this would bring them a better
future. Other Russians, wary of Moscow's success so far, would have to be
convinced that the Moscow mayor could be able to bring some improvement of
their situation.
Luzhkov, who has been skillfully building up alliances with regional
governors, has proposed to Primakov to change Russia's federal structure,
reducing the number of subjects of the federation from 89 to 12. The move, if
implemented, would effectively decrease the number of regional bosses whose
support he would need, but Primakov is seen as unlikely to agree to the
Luzhkov's critics also indicate two points that opponents could use against
the Moscow mayor. Luzhkov has been criticized by human rights organizations
and by many Russians for his maintenance of Soviet-era practices, like the
Moscow residency permit, or propiska. The Constitutional Court twice
instructed Moscow authorities to abolish the propiska, but Luzhkov told
officials to disregard the rulings.
Others underline that Luzhkov, far from being an ordinary politician who is
counting on businesses support to finance his political initiatives, is
himself a full-fledged member of Russia's so-called "oligarchy" and he would
have trouble finding the support of other members of the same category. 
Luzhkov's financial and industrial resources include telecommunications,
television and printed media assets, car, electronics and food-processing
factories, refineries and dozens of filling stations. With "this kind of
incredible resources," writes the Moscow Times newspaper, Luzhkov can only be
considered an oligarch who is "well ahead of the pack," as he is "the only
oligarch who holds elected office." 


'Big Money' Predicts Less Political Stability 

20 September 1998
[translation for personal use only]

In the 20 September issue of Russian NTV's "Big Money" program
presenter Igor Pototskiy analysed the financial situation in Russia in the
context of the formation of a new government under a new prime minister,
Yevgeniy Primakov. Pototskiy suggested that the new government was
becoming less stable because of the influence of the leftist opposition. 
He said the future would be unpredictable until the key posts of finance
and economics ministers and of a deputy prime minister in charge of social
issues had been filled and an anticrisis program worked out. Pototskiy
said that the only stable figure in the government was Primakov himself.
According to Pototskiy, the only available political forces to form
the government are the leftists led by the Communists and Our Home is
Russia. Even these parties are trying to distance themselves from too much
active involvement in the government, Pototskiy said. He pointed out that
there are plans to bring 12 Regional governors into the governmentpresidium.
Pototskiy said the leftists opposition is returning to its rigid
demands: Yeltsin should resign and a government of national interest should
be formed. He stressed that the Russian Government is now faced with the
problem of either saving the national banking system or saving its face on
the international arena. The government is not et ready to say what
measures it will take and how it will find a compromise, Pototskiy said. 
So far, plans announced by Primakov on 18 September regarding the
government economic policy show that old contradictions had not been
removed: The government wants to support both the ruble exchange rate and
the banking system, Pototskiy said.
Commenting on the government's economic plans, analyst Vladimir
Preobrazhenskiy said: "No measures will help to stimulate economic growth
unless bankruptcies are announced." The program is weak because it is
orientated toward social goals, the analyst added. According to the
analyst, the government should ensure that the right kind of incentives are
provided to stimulate economic growth, and printing more money is not an
alternative. He pointed out that the government intended to help Russian
banks to find a way out of the crisis. He said, the Central Bank decided
last Wednesday [16 September] to exchange 10 percent of frozen T-bills held
by a number of Russian banks for bonds of the Bank of Russia, which are to
be redeemed within the next three months. According to Preobrazhenskiy,
this measure was aimed at helping commercial banks to restore their
liquidity by obtaining short-term loans from the Central Bank. However, 25
foreign banks, which sustained losses when T-bills were frozen, had sent an
indignant letter to the Russian Government because Russian banks had been
given more advantages on the securities' market. The analyst stressed that
the Central Bank must assure foreign investors that there will be
Pototskiy said that business in Russia is currently paralysed because
no-one knew what to expect. However, if the government has no other
alternatives, it is better not to have a clear economic strategy, rather
than to follow the previous governments' plans. The government is pressed
for time because Russia's international credit rating is falling, and
default is looming large, which basically means the country's bankruptcy,
Pototskiy said.


The Guardian (UK)
23 September 1998
[for personal use only]
Killer TB threat to world 
By James Meek in Moscow

A deadly man-made infection is pouring on to the streets of Russia from fetid
prisons, say aid agencies and health experts. 
It is a mutant form of tuberculosis called multi-drug resistant TB - MDR-TB -
produced when the treatment of an ordinary TB sufferer is interrupted or
Russian jails are thought to have up to 20,000 inmates with MDR-TB.
Tina Demeulenaere, of Médecins sans Frontières' Moscow office, said: 'Sub-
standard treatment and non-isolation of TB patients means the prison system is
turning out MDR-TB patients like biscuits.
'It is a time bomb, because they are being freed, they infect other people,
these people travel. It'll be all over the world before you know it.'
Ordinary TB can be cured in Russia in six to eight months for less than £65,
using a World Health Organisation system called Dots.
MDR-TB takes 18 months and thousands of pounds to treat, and there is only a
60-85 per cent survival chance.
A joint appeal for funds by MSF, the British aid agency Merlin and the United
States Public Health Research Institute warned: 'It is only a matter of time
before MDR-TB of Russian origin becomes a daily reality worldwide.'
More than £162 million is thought to be needed to tackle the crisis - £65
million to extend Dots across the whole country and £97 million to treat
existing MDR-TB cases.
'If this money is not spent soon, the cost of the epidemic to the world will
be counted in billions, and may become unmanageable,' said Alex Goldfarb,
director of the Russian TB Project, funded by George Soros.
Active TB cases were in steady decline in Russia before the end of the Soviet
Union, thanks to a network of specialist TB clinics. With the collapse of
communism, and the massive shift of resources away from welfare, active cases
are increasing by 10 per cent a year.
The overcrowded jails - roughly 1 per cent of the population is in prison -
have effectively become tuberculosis farms. The disease is nurtured by sick
prisoners mingling with healthy ones, then turned into MDR-TB by prison
pharmacies without secure supplies of the four basic drugs which TB patients
must take.
Typical prisons get only 20 per cent of the funds they need. Even the few
prisons where the aid agencies operate are grim places, like the MSF-supported
prison TB hospital in Kemerevo in Siberia, designed to accomodate 750, but
actually housing 1,800.
A 20-year-old Belgian administrator working for MSF in Kemerovo returned home
recently after becoming infected with TB.
When prisoners are freed, they go back to the community, ill or not, and can
easily fall outside the health net.
In Moscow, many end up at the MSF's mobile clinic for the homeless, a
converted bus near Kazan station.
Dr Oleg Zezelkalo, an MSF doctor, said: 'Most of the people who come to us
have TB, and many have been released from prison knowing they have it. We're
here for them, but if they're released in Saratov or Volgograd where are they
going to go?
'It is comparable to Aids. TB has a tendency to spread. We're in the early
stages of an epidemic.
'It's moving up the social scale to the middle classes and it's not going to
stop at the borders of Russia.'


Gustov Says Supports Mergers Between Russian Regions

St Petersburg, Sept 21 (Interfax)--First Deputy Prime Minister Vadim
Gustov, who is in charge of regional policies, has said he supports
reducing the number of the Russian Federation's constituent members bymergers.
Gustov told a news conference in St Petersburg Monday that the first
step should be to unify the St Petersburg and Leningrad regions. "A poll
shows that 66% of St Petersburg residents" support the plan, he said.
Prime Minister Yevgeniy Primakov backs the idea. "Eighty-nine regions
is too many for Russia," Gustov quoted Primakov as saying.
Gustov, formerly governor of Leningrad region, said the unification
procedure should be detailed. "It is necessary to create a single
anti-monopoly committee (for the St Petersburg and Leningrad regions), a
single transport department, a single trade committee and a single
presidential representative office," he said.
"It will not be possible to merge the legislatures of the two members
of the federation at once. A two-chamber principle should be introduced in
order to obtain an effective legislature after the merger," Gustov said.
Regional policies are not an easy issue. "If we want to preserve an
integral country, we should adopt a law on budget federalism as soon as
possible," Gustov said. "The government should approach each region taking
into account the particular features of that region."


Microsoft says Russian information sector stagnating
September 22, 1998

MOSCOW (Reuters) - Computer software maker Microsoft said Tuesday the
information industry in Russia had stagnated since the beginning of the year. 
Microsoft announced that sales in the former Soviet Union, minus Ukraine and
the Baltic states, had risen 42 percent in the year to June 30 to $37 million,
but that almost all the growth was in the first half. 
``Microsoft would be happy to offer solutions to partners, but we are not the
central bank,'' Olga Dergunova, head of Microsoft's representative office in
Russia, told a briefing. 
She said Microsoft would not scale back plans for introducing new Russian
language products but business was ``stagnating.'' 
``When the banking system works, we can talk about moving forward,'' she said.
Russia is mired in financial crisis and the bank payments system is nearly
frozen, meaning companies cannot make payments to each other. Businesses,
especially those like the computer industry that keep accounts in dollars,
cannot operate when there is no exchange rate stability, Dergunova said. 
She said companies in Russia tended to make cuts in information systems one of
their first cost-saving measures, while the customer base was also hit. 
``Computer companies mostly work with small businesses,'' she said, adding
that illegal pirate software, which had been decreasing to around 88 percent
in 1997, rose during crisis periods as at present. 
``It is tough for our partners,'' she said. ``Some probably will not make


Russia's Maslyukov Says Government Won't Take Over Industry

Moscow, Sept. 22 (Bloomberg) -- Russian First Deputy Prime Minister Yuri
Maslyukov said the government doesn't plan to take over industrial or
financial services companies or redistribute property, Russian news agency
Interfax reported. Still, Maslyukov said factories which have been sold too
cheaply and which don't have an efficient owner will be taken over by the
state, he said. Russia will ``not be able to sort out all of its problems as
quickly as it would like,'' Maslyukov said. 
Russian industrial output fell 11.5 percent in August from the same month a
year earlier, its biggest drop since November 1994 as a falling ruble drove up
prices of imported materials and dampened demand. 


Chubays Hails 'Immense Potential' of Kiriyenko, Nemtsov 

MOSCOW, Sept 19 (Interfax) -- Former Russian Prime Minister Sergey
Kiriyenko and former Deputy Prime Minister Boris Nemtsov "have immense
potential" for further political and economic activity, former First Deputy
Prime Minister Anatoliy Chubays told a news conference in Vladivostok,
Russia's Far East.
Chubays, now the chief executive of the Unified Energy Systems of
Russia grid provider, said he respects Kiriyenko for "having led the
government and having shown a great deal of professionalism in a difficult
economic situation."
"Oligarchs have invested big money in creating a negative image for
Nemtsov," Chubays said. "Nemtsov has done a great job in the energy and
railroad sectors. Boris is an outstandingly talented person. I hope he
will show his worth."



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